How It Works
How It WorksThe MERS Health Care Savings Program is an employer-sponsored program providing a tax-free medical savings account for post employment medical expenses. The account is available for use by your employees, their spouses and any legal dependents, as well as a named beneficiary. The MERS Health Care Savings Program is not a Health Savings Account, Flexible Spending Account, or Health Reimbursement Account. It is a tax-exempt Section 115 Governmental Integral Part Trust, which ensures the assets are used for reimbursement of future medical expenses only.
HCSP Process
Step 1 – Employer and employee groups work together to design the contribution structure using one or more of the types of contributions
Step 2 – Individual employee accounts are invested and grow tax-free
Step 3 – Upon separation of employment, regardless of age, the account becomes available for tax-free medical expense reimbursement
Funding The Program
Contributions to your Health Care Savings Program are based on the provisions indicated in the Participation Agreement and include:
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Basic Employer Contributions are a flat dollar amount or a percentage of pre-tax wages, which have a vesting schedule.
Vesting can be:
- Immediate – the employee is fully vested upon participation
- Cliff – the employee is fully vested upon completion of a stated number of years of service
- Graded – the employee is partially vested in the account balance according to your adopted schedule. For example, the employee is 50% vested after 1 year and 100% vested after 2 years.
Mandatory Salary Reductions are a fixed-dollar or percentage of pre-tax wages withheld through payroll deduction. All employees in the specified division must make the specified contributions; it is not optional. These are not required to be reported on the employees’ W-2s.
Post Tax Voluntary Contributions may be started or stopped at any time. The investment returns and reimbursements are tax-free even though the contribution was after tax.
Leave Conversion Contributions refer to leave time that is not used (either a portion or all) may be contributed to a participant’s MERS HCSP account. Some examples of leave include vacation, personal time, sick time, or severance pay. The leave conversion is deposited into participant accounts at a set time determined by your employer (i.e. annually, time of separation, or other time chosen by employer). If a leave conversion contribution has been selected by the employer, it is mandatory. Employees cannot choose how to receive their leave conversion. However, each division by define its own payout option.
Plan Advantages
There are many benefits of the MERS Health Care Savings Program (HCSP).
Cost-effective
Because we operate on a not-for-profit basis, HCSP is offered at no cost to employers, and our already low participant costs continue to decrease.
Unique Beneficiary Structure
HCSP allows participants to name both a primary and contingent beneficiary, a feature that is unique to MERS.
Sound Investments
The HCSP investment menu provides your employees with select investment options to design a diversified portfolio to match their investment needs.
Participant-outcome Focused
MERS employs behavioral economics to design a streamlined investment menu that guides participants to make decisions in their own best interest, while giving them the freedom to pursue their own investment choices.
Financial Fitness Tool
The Financial Fitness tool is available to MERS participants through myMERS. The tool includes a series of workouts they can engage in to help determine their current Financial Fitness Score in the areas of emergency savings, debt management and planning for the future along with the ability to create a budget to manage their day-to-day spending and as a bonus, workouts to help with insurance and health savings account management (if applicable).
Fiduciary Responsibility
As the sole fiduciary for our retirement plans, MERS takes on the liability for selecting the investment options, monitoring fund performance, and ensuring fees are reasonable. Learn more about fiduciary responsibility.